IIP numbers raise doubts as sugar output doubles

NEW DELHI: Near doubling of sugar output in October has again raised doubts over the quality of data reported in the Index of Industrial Production (IIP) released on Wednesday, but an official in the statistics office said the numbers were in order.

The sub-index for sugar in the IIP was up 96% in October, contributing significantly to the 8.2% overall rise in the index. "The number does raise doubts. The 96% rise in sugar production accounts for almost 1.46% of the 8.2% rise in the total IIP," said Saugata Bhattacharya, chief economist with AXIS bank.

In April this year, the statistics ministry had revised its January IIP to 1.1% from 6.8% blaming reporting errors in sugar data by the ministry of consumer affairs, food and public distribution.

An official of Central Statistics Office said data did raise an alarm, but it has been verified from directorate of sugar.

"We collect the data from the sugar directorate and we had sent it back for confirmation after we saw the 96% number. However, they have confirmed it on the basis of seasonality and the number is not expected to be revised," a CSO official said. Officials in the sugar directorate under the department of food and public distribution defended the authenticity of the data and explained the abnormal increase in sugar production was because of a rise in capacity of existing sugar mills and entry of new mills.

"The number of mills operating has almost risen by 33.3% and has contributed to the higher production. Also, most of the mills have sprung up in the southern states where production is almost year round unlike the northern ones which operate for 6-7 months only," an official involved in compiling the data for the food and public distribution department told ET.

As per the data provided by the consumer affairs, food and public distribution ministry, the sugar production in October 2012 rose to 3.83 lakh tonnes from 1.96 lakh tonnes in the same month last year.

The IIP has been criticised by experts for its volatility. The RBI governorD Subbarao has called it "analytically bewildering."

"People view the index with a pinch of salt. The last six months data cannot be used for any policy making as reading a trend is impossible," says DK Joshi, chief economist with CRISIL, a ratings agency.